It was pitched to civic leaders and a public with little sailing knowledge as an event that would generate more than $1 billion in economic activity at no cost to taxpayers while showcasing the grandeur of the Bay Area to a global audience.

Some of that may still happen, but as challenger races for sailing's most prestigious competition begin in less than a month, fundraising to offset San Francisco's costs for hosting the America's Cup regatta hasn't met benchmarks and still lags behind city spending as it enters a crucial phase.

While a group of private philanthropists and community leaders has steadily chipped away at reimbursing the city for costs, now projected to approach $22 million for things like permits, police and increased Muni service, the city is still about $800,000 short on $1.6 million in costs from December, records show.

At the end of the month the group will receive another bill of about $3 million to $4 million for things like liability insurance, putting up railings around the perimeters of piers and signs to help cyclists and pedestrians find their way to the action.

The fundraising group, known as the America's Cup Organizing Committee, has paid more than $10.5 million for event expenses, with almost $7.6 million of that going directly to the city.

However, the group is still short of the $12 million the organizing committee pledged to have in the bank for the city a year ago. Another $10 million was to have been raised this year. The committee says it has raised $15 million to date in cash and pledges for future payment, with some of that money coming early next year.

Kyri McClellan, a former city employee who is now helping to lead the fundraising effort, said money is expected to continue arriving throughout the almost three months of sailing, but that it wouldn't cover city expenses, and at least some of the expected $13 million in increased hotel, payroll and retail tax revenue linked to the event would be needed to cover the city's outlay.

"I have every expectation the city will be made whole through our fundraising efforts combined with the city's additional tax receipts generated from the event," McClellan said. "That has been the formula since we embarked on the bid in 2010."

Footing the bill

Supervisor John Avalos, though, a progressive standard bearer who has become critical of the event, disputes that increased tax revenue was always planned to cover city costs.

"That's not what the commitment was," Avalos said. "We were told that this would lead to revenue for the city. Well, it's not coming to our neighborhoods. It's going to feed the event itself."

When initially pitched to the city, the event was expected to draw 15 teams and generate $1.4 billion for the city. The organizing committee said it would raise $32 million to cover city expenses, but all of those projections, including the city's costs, have been scaled back since the event has drawn just four teams.

City documents show that applying event-related tax revenue to cover event costs was contemplated by some for more than a year.

Surplus projected

A February 2012 report by Board of Supervisors Budget and Legislative Analyst Harvey Rose projected city costs for hosting the event at almost $52 million. With $32 million from the America's Cup Organizing Committee and $22 million from estimated event-related tax receipts, Rose's report projected, the city would have a $2.2 million surplus from the event.

Separate February 2012 documents from the city's economic development office also applied increased hotel and other tax revenue to the city's hosting costs. That analysis projected a surplus of $7.7 million to $8.5 million at the end of the day if the organizing committee raised the full $32 million.

"The tax revenues were always contemplated as a way - maybe not the only way or the best way - to make the general fund whole; the goal was to raise the money," said Jane Sullivan, a spokeswoman for the city's America's Cup group.

Stephen Barclay, head of the America's Cup Event Authority and software titan Larry Ellison's chief negotiator with the city on the host agreement, described Avalos' comments as "disingenuous."

"The underlying premise when the city took on the America's Cup was that it would not cost the taxpayers any money, not that they would make a profit," Barclay said. "All this other discussion is really about profit. I find that disingenuous."

Barclay pointed to projections that the event will generate $900 million in economic activity for the Bay Area as evidence of its benefits to the host region.

Fundraising challenges

Fundraising efforts were hampered by the global economic malaise, sailing's lack of popularity in the United States, and the perception in some quarters that the money was a subsidy for a billionaire's boat race, those knowledgeable about the effort said.

The death of Artemis Racing sailor Andrew "Bart" Simpson during a May 9 training accident on San Francisco Bay also cast a pall over the event, prompting the postponement of two high-ticket fundraising events, including one that had been scheduled that day at a private home on Russian Hill with Mayor Ed Lee and other officials slated to attend. Those are now rescheduled for next week.

"We lost a little time, but it wasn't a material setback," McClellan said.

Regardless of the final fundraising tally, the event has already created long-term benefits for residents by serving as the catalyst to get approvals and funding for projects that have been on the drawing board for years, McClellan said, including a new cruise ship terminal on Pier 27, a new waterfront park at the foot of Brannan Street, pedestrian improvements to Jefferson Street in Fisherman's Wharf and the renovation of the marina's west harbor next to the Marina Green.

Those projects and other event-specific port work are almost entirely being paid for using $202 million in local, state and federal money.

"San Francisco has already won the race and the starting gun hasn't even gone off," McClellan said. "The race will be gravy on top."